528 F.

2d 1228

Ruth JOHNSON et al., Plaintiffs-Appellants,

v.
Henry C. WHITE, Commissioner of Welfare, State of
Connecticut, Defendant-Appellee.
No. 147, Docket 75--7153.

United States Court of Appeals,

Second Circuit.
Argued Oct. 10, 1975.
Decided Nov. 28, 1975.

David M. Lesser, New Haven, Conn. (William H. Clendenen, Jr., New

Haven, Conn., Douglas Crockett and Dennis O'Brien, Willimantic, Conn.,
of counsel), for appellants.
Francis J. MacGregor, Asst. Atty. Gen. (Carl R. Ajello, Atty. Gen. of
Conn., of counsel), for appellee.
Before KAUFMAN, Chief Judge, and FRIENDLY and SMITH, Circuit
Judges.
FRIENDLY, Circuit Judge:

This class action by Connecticut beneficiaries of the Aid to Families with

Dependent Children (AFDC) program, jointly funded by the Federal
Government and the State, has been pending since September, 1971. It has
required enormous effort by counsel for the plaintiffs and for the State, by
HEW, and by Judge Blumenfeld, all of whom have labored conscientiously and
cooperatively to achieve a just result. Although the history of this case is fully
related in Judge Blumenfeld's opinion, 353 F.Supp. 69 (D.Conn.1972), some of
the factual material must be repeated in order to put into perspective the points
we are asked to decide.

In the Social Security Amendments of 1967, effective January 2, 1968, 81 Stat.

821,898, 42 U.S.C. 602(a)(23), Congress added 402(a)(23) to the Social
Security Act. This stipulated that, in order to receive federal participatory

funding,1 a state's plan for AFDC must

3
provide
that by July 1, 1969, the amounts used by the State to determine the needs of
individuals will have been adjusted to reflect fully changes in living costs since such
amounts were established, and any maximums that the State imposes on the amount
of aid paid to families will have been proportionately adjusted.
4

At that time, the State of Connecticut computed its 'standard of need' by

determining a separate budget for each AFDC-assisted unit; while this budget
included certain standardized sums for the basic needs of food, clothing,
personal incidentals, and household supplies, the sums for shelter, utilities, and
various 'special needs' were included either at the actual cost to the recipient
unit or at that cost limited by a stated maximum. Payments were made on the
basis of this standard of need as reduced by various sums representing income
or resources otherwise available to the recipient unit. Following the
Congressional mandate, the State Commissioner of Welfare proceeded to adjust
a large part of the standard of need to account for inflation. In the absence of
any action reducing the percentage of need to be met, this correspondingly
increased the level of payment as well. Consultation with officials at HEW led
to further adjustments in various components of the standard.

In 1971 the State decided to change from a system in which the needs of AFDC
recipients were computed and paid on an individualized basis to a system in
which, except for certain relatively unusual items, recipients would be paid on
the basis of a 'flat grant,' varying only by the number of persons in the assisted
unit. This new system was to be known as the Connecticut Family Assistance
Plan (CFAP). In order to determine the standard of need upon which the grant
could be computed, the State, in the summer of 1971, conducted an elaborate
statistical analysis, which will be discussed in detail at various points in this
opinion. For the moment, it will suffice to say that, in broad terms, the State
computed the standard of need for each size of assistance unit by averaging
together a random sample of the sums budgeted for those units (before income
disregards) under the prior assistance program. The budgets used had been
constructed in the period from June 1, 1970 to May 31, 1971.

The State planned, as of November 1, 1971, to implement a system in which the

standard of need was constructed as just described, and the level of benefits
would be equal to 85% of need. On October 28, 1971, following a hearing, the
district judge issued a preliminary injunction preventing that implementation.2
At a further hearing held a few days later, the parties and the court agreed that
HEW should be invited to review the plaintiffs' claims and to submit a brief as
amicus curiae. HEW then conducted an extensive review of the State's

program; the State incorporated into its plan various changes suggested during
this review, which resulted in yet further updating of some of the component
parts of the new averaged standard of need.
7

On April 3, 1972, HEW filed its brief endorsing the State's program. Defendant
then moved to dissolve the preliminary injunction, including in its moving
papers a representation of the State's willingness to raise the level of benefits to
equal the standard of need, 'barring unforeseen circumstances.' Following
another hearing, the district court, in an opinion dated June 12, 1972,
terminated the preliminary injunction and, with two exceptions not here
relevant, ordered judgment entered for the defendant.

Plaintiffs thereafter submitted two motions. One was entitled 'Motion to

Reopen, Set Aside, Alter and Amend Judgment, For Relief From Judgment, To
Allow Further Evidence and Allow Reargument, For Rehearing and For Stay of
the Execution of Judgment Pending Disposition of Motion.' The other was
entitled 'Motion to Amend and Supplement Findings of Fact and Conclusions of
Law.' The motions were accompanied by various affidavits and proposed
exhibits, indicating material which plaintiffs would introduce at the reopened
hearing. At the parties' request decision on these motions was deferred pending
lengthy efforts at settlement. When these ultimately proved unproductive, the
judge denied the motions and this appeal followed.

I.
9

Plaintiffs' initial contention is that, by directing dismissal of the complaint, the

judge transgressed his authority, and that we should reverse and remand on that
ground alone. They do not contest that, just as a court may order a
consolidation of the trial on the merits with 'an application for a preliminary
injunction,' F.R.Civ.P. 65(a)(2), so it may order consolidation with a motion to
end one. Their point, rather, is that the judge did not give notice of his intention
until after the hearing had been concluded.

10

We agree that the judge should have done this either during the hearing or, in
any event, before rendering his decision. Capital City Gas Co. v. Phillips
Petroleum Co., 373 F.2d 128, 131 (2 Cir. 1967). However, in order to obtain a
reversal for such an error, a party must show, not only surprise but 'prejudice' in
the sense of having other material evidence to introduce. Nationwide
Amusements, Inc. v. Nattin, 452 F.2d 651, 652 (5 Cir. 1971); Eli Lilly & Co. v.
Generix Drug Sales, Inc., 460 F.2d 1096, 1106-07 (5 Cir. 1972); 11 Wright &
Miller, Federal Practice and Procedure 2950 at 487--88 (1973). Apart from
plaintiffs' failure to make specific objection to the judge's failure to give notice

in either of their two post-judgment motions, our disposition of the case is such
that plaintiffs will have no ground to complain of the error. So much of their
proffered evidence as we deem relevant can be offered on the remand we are
directing on other grounds.
II.
11

Turning to the merits, all of plaintiffs' contentions center on the application of

402(a)(23), which was given extensive consideration in Rosado v. Wyman, 397
U.S. 397, 90 S.Ct. 1207, 25 L.Ed.2d 442 (1970). However, since the parties are
in sharp disagreement concerning the interpretation of that opinion, we find it
convenient to deal at the outset with those attacks which do not require an indepth analysis of it. Those attacks turn on Connecticut's alleged failure to adjust
the component elements of its standard of need 'to reflect fully changes in living
costs since such amounts were established.'

12

The most basic challenge concerns the use, as a basis for updating, of the
Consumer Price Index, United States Urban Average, which allegedly does not
reflect inflation said to be more rapid in Connecticut than in the country
generally.3 In a letter to the states dated October 17, 1969, HEW implemented
the updating requirement of 402(a)(23) by establishing seven 'Acceptable cost
study methods.' These differed in the degree of the burden placed on the state
administering agency. For example, while Method C allowed the state to
'conduct a statewide cost study of the items of living,' Method B--the method
applied by Connecticut in part and now questioned--allowed the states to rely
on federally-generated statistics. It provided for the use of 'the U.S. Department
of Labor, Bureau of Labor Statistics, Consumer Price Index, for the appropriate
region (to) determine the current index price for the applicable items of living.'
In its amicus brief HEW interpreted this regulation as follows: '(I)t is the
position of HEW that where a State such as Connecticut does not contain one of
the 23 Standard Metropolitan Statistical areas for which there are individual
city indexes then the use of the U.S. City Average Index will satisfy the
requirement of using the C.P.I. for the 'appropriate region."

13

Plaintiffs have not presented--indeed in the absence of expensive cost studies

could not present--definitive proof that the nationwide CPI--Urban Average
Index failed to reflect changes in statewide Connecticut living costs. Their case
at trial was that Connecticut should have used the cost of living indices for
Boston and/or New York City, the two of the 23 Metropolitan Statistical areas
nearest to Connecticut. We see no logic compelling that conclusion, particularly
in view of HEW's contrary position; see Rosado, 397 U.S. at 415, 90 S.Ct.
1207. Geographical proximity does not guarantee identity of economic

circumstances.
14

On appeal plaintiffs take a different tack, suggesting use of a Northeast regional

index. While there is a controversy whether this was available at the time of
Connecticut's update,4 we need not attempt to resolve it since plaintiffs did not
urge use of any regional index upon the district court. All that is left of
plaintiffs' general attack on updating is the contention that even if they have
suggested nothing better, or even if at the time of the update there was nothing
better, use of the CPI--Urban Average Index was so manifestly inappropriate
that Method B was unavailable and Connecticut was bound to engage in a state
price study, despite HEW's view to the contrary. We see no reason to think that
402(a)(23) was intended to require statistical accuracy to the degree of
denying to a state the use of common indices of inflation; accordingly, we reject
this argument.5

15

In addition to this general claim, plaintiffs also contest the updating of two
specific items. The first is 'Household furnishings,' an item previously made
available on a 'special need' basis. Plaintiffs contend that the 6.2% change made
in updating that item from 1967 to 1969 is incorrect, and that the use of the
correct sub-index from the CPI--Urban Average would show in the
neighborhood of an 8% change. The evidence, however, indicated that while
the CPI index for some of the items included in this broad category showed a
change of 8% or more, the rate of inflation for other items was considerably
lower; in addition, there was testimony that this category had been repriced, at
least in part, through actual shopping surveys. HEW, in its brief, stated that it
'consider(ed) the updating procedures to be proper.'

16

The trial judge, although not mentioning this specific item by name, found that
various components of the standard of need, including 'certain special needs,'
had been 'sufficiently updated.' We think this issue, raised below, was fairly
covered by this finding of the trial judge, who made a conscientious effort to
address every issue tendered. There was evidence to support his conclusion,
and plaintiffs do not now assert that they have any further data to submit on this
particular issue; accordingly, we will not disturb his finding.

17

Plaintiffs' second specific challenge relates to the updating of the 'personal

incidentals' part of the basic welfare grant (under the pre-CFAP system) for
food, clothing, personal incidentals, and household supplies (FCPH). The
evidence showed the following: In 1967, a State Cost of Living Commission
had reviewed various welfare standards, and had increased parts of the FCPH
grant by a significant percentage. For the personal incidentals component,
however, the Commission had set a figure which for adults and some children

was the same figure as that which had been in use since 1963, and for other
children was in fact somewhat lower. Following the adoption of 402(a)(23),
the state updated the personal incidentals item, using 1967 as the base date.
18

Plaintiffs contend that the State failed to comply with the statutory requirement
that items be updated to account for inflation 'since such amounts were
established.' The sum for personal incidentals, they contend, was 'established'
in 1963; defendants claim that it was 'established' in 1967. We think, as did
HEW and the trial court, that the State has the better of this argument.
Connecticut was making an effort, even before the enactment of 402(a)(23),
to keep its standards in line with rising living costs, and plaintiffs do not
contend, nor does the evidence show, that this effort was in any way a sham.
Although it might be true to say that the Commission's action in 1967 would not
be in full compliance with the more stringent requirements of the later-enacted
federal provision, that is quite different from saying that it was in any sense an
attempt to circumvent 402(a)(23) as later enacted. We think the district court
was justified in following HEW's lead in finding that the personal incidentals
item had been sufficiently updated.

III.
19

We now turn to plaintiffs' contentions relating to the changes made by CFAP

with respect to shelter allowances. Since this is the area where the profound
differences between the parties over the meaning of Rosado are most important,
some general discussion of that case may be useful by way of preface.

20

We start from the proposition that, under the plain language of 402(a)(23), if
a state had previously 'established' a standard of need fully conforming to the
Constitution, the requirements of the Social Security Act, and HEW's
regulations thereunder, and had then adjusted the figures 'to reflect fully
changes in living costs since such amounts were established,' the result would
be immune from successful attack on the ground that a more finely tuned
analysis would show that the previous plan did not provide a sufficiently high
standard of need.6 The words of the statute, which Mr. Justice Harlan
characterized as being, along with 'those common-sense assumptions that must
be made in determining direction without a compass,' a court's 'chief resources'
in determining the meaning of 402(a)(23), 397 U.S. at 412, 90 S.Ct. at 1218,
do not permit any other conclusion. In addition, although the legislative history
'reveals little except that we have before us a child born of the silent union of
legislative compromise,' 397 U.S. at 412, 90 S.Ct. at 1218, a more expansive
reading of the statute would be inconsistent with the fact that Congress refused
to adopt language that arguably would have chartered more extensive judicial

forays, see 397 U.S. at 409--10, 90 S.Ct. 1207.

21

In opposition to this interpretation, plaintiffs rely on two passages in the

Rosado opinion. One is the statement that a purpose of 402(a)(23) was 'to
require States to face up realistically to the magnitude of the public assistance
requirement and lay bare the extent to which their programs fall short of
fulfilling actual need,' 397 U.S. at 412--13, 90 S.Ct. at 1218. The other is that a
state 'may not obscure the actual standard of need,' 397 U.S. at 413, 90 S.Ct. at
1218, and that while the statute 'leaves the States free to effect downward
adjustments in the level of benefits paid, it accomplishes within that framework
the goal, however modest, of forcing a State to accept the political consequence
of such a cutback and bringing to light the true extent to which actual assistance
falls short of the minimum acceptable,' id.

22

However, these passages must not be read in isolation. Earlier in the opinion,
397 U.S. at 408, 90 S.Ct. at 1216, Mr. Justice Harlan had noted that both as to
the 'standard of need' and as to the 'level of benefits,' 'Congress has always left
to the States a great deal of discretion'--followed by a reference to King v.
Smith, 392 U.S. 309, 318, 88 S.Ct. 2128, 20 L.Ed.2d 1118 (1968).7 Later, after
making the rather general statements on which plaintiffs rely, the opinion
returned to the issue in the case, namely, the requirements of 402(a) (23) in a
situation where a state has not merely updated the figures established for need
but at the same time has altered its plan. The holding was that while the
amendment left the states free to do this within the limits of the Federal
Constitution, the Social Security Act, and the regulations thereunder, a state
could not use a changed plan to circumvent the requirement for updating needs.
In what we take to be the core of the opinion, the Court said, 397 U.S. at 414-15, 90 S.Ct. at 1219:

23follows from what we fathom to be the congressional purpose that a State may not
It
redefine its standard of need in such a way that it skirts the requirement of reevaluating its existing standard. This would render the cost-of-living reappraisal a
futile, hollow, and indeed, a deceptive gesture, and would avoid the consequences of
increasing the numbers of those eligible and facing up to the failure to allocate
sufficient funds to provide for them.
24

Later the Court put the same thought thus, 397 U.S. at 419, 90 S.Ct. at 1221:

25
Section
402(a)(23) invalidates any state program that substantially alters the content
of the standard of need in such a way that it is less than it was prior to the enactment
of 402(a)(23), unless a State can demonstrate that the items formerly included no
longer constituted part of the reality of existence for the majority of welfare

recipients.
26

What caused New York's plan to founder was that its new program had
eliminated the previous allowance for special grants (which was sometimes
paid as a substitute flat grant of $100 per person) rather than averaging them out
and adding that figure to the basic recurring grant, 397 U.S. at 416, 90 S.Ct.
1207.8

27

When we now address the manner in which the shelter component of CFAP
was constructed, it could be claimed that any averaging process with respect to
shelter allowances is invalid. The cost of shelter can depend on factors such as
locality, access to public housing, prior ownership of a dwelling, etc., beyond a
recipient's control. Some other states, such as New York, have not attempted to
include shelter allowances within their flat-grant programs; see Boddie v.
Wyman, 434 F.2d 1207, 1211--12 (2 Cir. 1970), affirmed, 402 U.S. 991, 91
S.Ct. 2168, 29 L.Ed.2d 157 (1971).

28

Plaintiffs' argument, however, is more modest; they claim only that the process
of averaging is invalid when 'statistically distinct populations' have been
merged together, and that Connecticut violated that standard when it averaged
together the budgets of assistance units which were the sole occupants of a
housing unit with assistance units which shared quarters with non-recipients.
Using statistical data plaintiffs showed, and the trial court found, that the
budgeted needs of these two groups were sufficiently different to make them
separate populations.

29

However harshly this program might bear on those units for whom the
averaged sum was lower than the previously determined budget for shelter, we
do not think that 402(a)(23) prevents averaging in this situation. This result
follows from the Court's indication that New York could have abolished its
former system of special grants if only it had included them in the figures used
to determine the basic recurring grants to all AFDC recipients; this action
would, of course, have taken a portion of the grants away from those who
needed them and given sums to those who did not. It follows also from the
statement, 397 U.S. at 419, 90 S.Ct. at 1221:

30
Providing
all factors in the old equation are accounted for and fairly priced and
providing the consolidation on a statistical basis reflects a fair averaging, a State
may of course, consistently with 402(a)(23) redefine its method for determining
need.
In any case, Connecticut itself has now moved to cure these inequities in

31

In any case, Connecticut itself has now moved to cure these inequities in
CFAP. Legislation adopted in 1974 and 1975 has resulted in a new 17--2(c)
of Title 17 of the Connecticut General Statutes, which we reproduce in the
margin.9 As we read the statute, it strips the shelter component of the flat grant
of any significance except for families whose need is no more than the flat
grant but who would benefit if it were higher.10

32

Plaintiffs are on firmer ground in their contentions that at least some of the
previously established rental allowances were unlawful under other provisions
of 402(a) or HEW regulations. Their criticisms are directed at the four
following situations:

33

(1) When an AFDC child resided with a non-needy, non-legally liable relative,
e.g., an aunt, the state budgeted $20 per month for one child, $30 for 2 children,
and $40 for 3 or more children;

34

(2) When an assistance unit as a whole resided with a stepfather, the state
budgeted a prorata share of actual rent or of the maximum allowed rent;

35

(3) When an assistance unit as a whole resided with a legally liable relative, or
with a non-legally liable relative, or with a friend, the state also budgeted a
prorata share of actual rent or of the maximum allowed rent;

36

(4) Finally, in several instances the state budgeted no rent at all.

37

To take the easiest case first, Connecticut cannot properly include in the base
for CFAP shelter allowances sums that were determined under an unlawful
attribution of income policy as delineated in Van Lare v. Hurley,421 U.S. 338,
95 S.Ct. 1741, 44 L.Ed.2d 208 (1975). While 402(a)(23) does not require
revision of previously lawful plans to achieve a closer approach to perfection, it
likewise does not permit continuation of an unlawful scheme simply because it
was updated. See Roselli v. Affleck,supra, 508 F.2d at 1282. Van Lare would
require an upward adjustment of the shelter allowances for those situations
included in categories (2) and (3) where the assistance unit lived with a person
not legally liable for the support of the children, although contributions actually
made would be deductible from the grant.

38

However, assuming that the sums are properly updated, see 353 F.Supp. at 83,
it does not seem to us that Van Lare or its predecessors, King v. Smith, supra,
392 U.S. 309, 88 S.Ct. 2128, 20 L.Ed.2d 1118 and Lewis v. Martin, 397 U.S.
552, 90 S.Ct. 1282, 25 L.Ed.2d 561 (1970), condemn the budgets included in
category (1). The most reasonable construction of this provision is not that it

was an attempt by Connecticut to attribute income which in fact was not

available to the dependent children, in violation of 45 C.F.R. 233.90(a), but
rather that it was an effort, not ruled out by any regulation that has been called
to our attention, to make sure that relatives did not profit by charging
outrageous rents to children who were in no position to protect themselves.
39

For category (4), the record is unclear as to what circumstances led to

budgeting certain families at a zero allowance for shelter. The State's brief on
appeal claims that these budgets were 'except for assistance unit size one,
caused in many cases by the recipients living in home-owned property not
mortgaged.'

40

However, plaintiffs' post-trial motions contained offers of considerable factual

material bearing on the zero-allowance cases, and it may be that plaintiffs can
show that many or all of these cases in fact run afoul of Van Lare. Accordingly,
this issue should remain open upon remand.

41

We therefore remand the portion of this case relating to the shelter allowance
component of CFAP for such introduction of evidence and ultimate adjustment
of the standard as the district court may find appropriate in light of this
opinion.11

IV.
42

Plaintiffs also make a number of attacks on the statistical accuracy of the way
in which Connecticut moved from its previous plan to the flat grant program of
CFAP. Accepting that a flat grant can be constructed from one based on
individual budgets 'providing the consolidation on a statistical basis reflects a
fair averaging,' 397 U.S. at 419, 90 S.Ct. at 1221, plaintiffs assert that the
proviso was not met.

43

The results of the State's statistical efforts are summarized in Stipulated Chart I,
which we reproduce as an appendix to this opinion. Vertically, the chart is
divided into assistance units 1 through 15, corresponding to the number of
AFDC recipients in the aided family. Horizontally, the chart is divided into five
categories: FCPH (the basic allowance for food, clothing, personal incidentals
and household supplies); shelter; excess utilities; recurrent needs (i.e., recurrent
'special' needs); and nonrecurrent needs (i.e., nonrecurrent 'special' needs). Each
category (except for 'excess utilities,' which did not have to be updated because
it was budgeted at actual cost) has an 'updated' column, to account for those
additional adjustments that had not already been included in the budgets drawn

for the year 6/1/70--5/31/71. The updated columns (plus the excess utilities
column) were added, for each numerical assistance unit, to yield an 'updated
standard of need' sum; it is this sum which forms the standard against which
payment is calculated (after deduction of available income and addition of any
needs not included in the composite standard).
44

The challenges here under discussion go to the adequacy of the statistical

techniques by which the factors for each size of assistance unit were computed.
The first, and broadest, claim of the plaintiffs is that the sampling technique
was insufficient. Plaintiffs do not contend that the sample, 3,079 out of
approximately 27,000 families receiving AFDC assistance, was inadequate for
all purposes.12 Their claim, to quote the district court, is rather 'that in certain
components of need for certain assistance unit sizes, the sample size was too
small to guarantee the selected level of confidence. The defendant's confidence
level, however, was for the average of budgeted needs as a whole, rather than
for each component in the standard of need,' 353 F.Supp. at 75. In other words,
the plaintiffs contend that each component part of the standard of need-apparently including each of the many special needs--should have been checked
out to see if there were enough examples of budgeting for that item in the
sample drawn; whereas defendants considered it sufficient if there were enough
sample budgets from each level of assistance unit, regardless of how many
times an individual item was budgeted.

45

Without pretending to a degree of knowledge of statistics which we do not

possess, it seems clear that plaintiffs' suggested approach would be both more
reliable and more arduous. 13 The question thus is whether the defendant's
method is sufficiently accurate that the additional expense of pursuing
plaintiffs' suggestion was not required. HEW was satisfied with what
Connecticut had done. This is the kind of problem on which we join Mr. Justice
Harlan both in viewing 'with concern the escalating involvement of federal
courts in this highly complicated area of welfare benefits,' 397 U.S. at 422, 90
S.Ct. at 1223, and in giving weight to the views of the expert agency charged
with supervising the expenditure of federal funds, 397 U.S. at 415, 90 S.Ct.
1207, in the absence of clear demonstration of error.

46

The more particularized claims are more troublesome. It will be noted that the
figures for assistance units 10 through 15 in Chart I are peculiar in certain
respects. On occasions the sums revealed by the survey do not fluctuate in any
intelligible manner. Under shelter, for example, the survey showed:

unit 10 $157.11
47

unit 11 144.61
48
unit 12 147.56
49
unit 13 164.05
50
unit 14 111.00
51
unit 15 220.35
52
53

While it may be reasonable to expect some flattening of the curve as the size of
the units increases, there is no rational basis for thinking that the shelter need of
a unit of 14 was a third less than that of a unit of 13 and only half that of a unit
of 15.

54

The explanation, of course, is the small size of the sample population in

assistance units 10 to 15. According to the State's figures there were only about
245 welfare families in those categories at the time of the survey, of which 39
were drawn into the sample actually used, distributed as follows:

unit 10 21 cases
55
11 9
12 5
13 2
14 1
15 1
56

Any averaging of each unit, based on such a small number of cases, would give
undue weight to peculiar circumstances.14 Accordingly, the State did the
following: First, for FCPH, expecting that there would be a definite correlation
between family size and budgeted sum since items such as food would increase
with the number of mouths to feed, the state averaged the FCPH budgets for
each assistance unit size but apparently, in the course of this process, 'smoothed
out' the one clear statistical discrepancy, FCPH for unit size 12. Plaintiffs do
not complain about this, except as regards an alleged arithmetical error
discussed below. Second, for all the other items, which, it was thought, would
give eccentric figures that did not correlate to the number of persons in the unit,
the State amalgamated unit sizes 10 to 15, thus gaining a larger population from

which an average could be drawn. Hence the identity of sums in all the other
'updated' columns for units 10 to 15. HEW approved both the use of the
individualized FCPH sums and the use of combined sums for the other
categories.
57

The district judge upheld this procedure on two grounds, 353 F.Supp. at 76-77---first, because the small size of the sample population meant that
consolidation would lead to a more statistically accurate averaging; second,
because of the 'possible economies of scale at this level.' We do not find either
point persuasive. Unless the second point were valid, the first has little weight.
Merely increasing the size of the sample does not enhance accuracy if the
populations are unlike; but the data gave little reason for thinking that
economies of scale which had been conspicuously absent as the size of
assistance units rose through the lower ranges would suddenly become evident
at size 10. The burden of enlarging the samples for assistance units 10 to 15
from 39 to a larger number, even to the whole population of 245, would have
been small. In sum, although the State considered variation in assistance unit
size to be a crucial variable, it assumed without proof that it would not matter
for most items in assistance units 10 to 15. Since the State's own policy
incorporated the opposite assumption, we think the State had the burden of
proving, rather than assuming, that its treatment of these units did not fail to
provide for needs which the previous assistance system had met.15

58

The State says that, however this may be, rectification by adding to the sample
is now impossible. While the various computer print-outs for CFAP apparently
still exist, they would not show the figures for families not included in the
original sample, and the State asserts that 'it is impossible to get W--52T's (i. e.,
budgets) at this time based on the old AFDC budgets in order to make up a new
sample.' Assuming this to be true, the burden of making a field study of the
actual needs of assistance units 10 to 15 at this time (if no other method is
available) is hardly massive in view of the small number of families involved.
We leave the fashioning of a remedy to the district court saying only that the
present record does not support the flat grants, for other than FCPH, for
assistance units 10 to 15 but that the remedy need not assure statistical
perfection if a reasonable approximation can be achieved at substantially less
cost.

59

Plaintiffs also contend that two arithmetical errors were made in computing
some of these unit sizes. The first contention is that an assistance unit two was
accidentally fed into the computer as a unit ten, thereby erroneously reducing
the average sum for unit 10. The second contention is that the sums shown on
one of the unit twelve budgets were mispunched, resulting in a reduction of

$407.79 in the FCPH component for that budget, and a lowering of the
averaged budget for the unit as a whole. Neither of these contentions seems to
have been made at trial, and only the second was included as part of the posttrial material. If we were not remanding on other grounds, we would scarcely
do so for this. On the other hand, since a remand with respect to assistance units
10 to 15 is required in any event, plaintiffs may raise these issues as a part of it.
60

The order of the district court is affirmed in part and reversed in part, and the
cause is remanded for further proceedings consistent with this opinion. No
costs.

61

-----------

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

APPENDIX
-------STIPULATED CHART I
CFAP
SAMPLE SURVEY AND UPDATED NEEDS
----------- ----------- -----------

---------

-----SURVEY
SURVEY
UPDATED
SURVEY
UPDATED
EXCESS
RECURR
FCPH
FCPH
SHELTER
SHELTER
UTILITIES NEEDS
--------------------------------------------------------------------38.12
41.15
27.65
33.36
.08
.6
90.75
93.85
94.05
94.94
1.44
3.4
128.10
128.11
115.00
115.85
1.71
3.7
158.41
159.14
126.97
128.20
1.53
3.7
193.23
193.73
130.07
131.03
2.15
4.1
230.03
230.63
138.58
139.56
1.92
4.1
272.22
272.93
145.38
146.36
2.04
4.5
309.17
309.97
151.34
142.41
1.49
4.9
347.53
348.43
150.88
151.95
3.01
5.4
374.93
375.94
157.11
154.93
5.35
7.5
408.37
409.47
144.61
154.93
5.35
5.8
389.60
442.95
147.56
154.93
5.35
10.7
485.10
486.40
164.05
154.93
5.35
12.5
537.60
539.00
111.00
154.93
5.35
22.0
583.85
585.35
220.35
154.93
5.35
10.2
--------------------------------------------------------------------Total standard increased 2.16% to obtain updated standard of need.

TABLE CONTINUED

--------------------------------------------------------------------------62
UPDATED
SURVEY
UPDATED
SURVEY
UPDATED
AMOUNT
RECURRENT NONRECURRENT NONRECURRENT
STANDARD STANDARD OF
PERCEN
NEEDS
NEEDS
NEEDS
OF NEED
OF NEED
UPDATE UPDATE
--------- ------------ -------------- -------- -------- ------ -----.70
4.72
5.27
71.12
80.56
9.44
13.2
3.72
9.60
10.54
197.85
204.49
6.64
3.3
4.01
13.02
14.29
259.84
263.97
4.13
1.5
4.06
16.14
17.76
305.35
310.69
5.34
1.7
4.49
22.67
24.98
350.12
356.38
6.26
1.7

4.45
25.30
27.83
398.06
404.40
6.34
1.5
4.95
28.20
31.03
450.39
457.32
6.93
1.5
5.26
32.79
36.10
498.20
505.23
7.03
1.4
5.97
34.33
38.00
538.23
547.36
9.13
1.7
8.94
36.57
45.11
576.13
590.27
14.14
2.4
8.94
49.14
45.11
607.94
623.80
15.86
2.6
8.94
39.63
45.11
587.49
657.28
69.79
11.8
8.94
63.65
45.11
725.37
700.73
24.64
- 3.4
8.94
15.24
45.11
685.84
753.33
67.49
9.8
8.94
36.13
45.11
850.54
799.68
50.86
- 5.9
--------------------------------------- -------- -------- -------------TOTAL ......... 7102.47
7255.49
153.02
45.4
*1240_
AVERAGE ........................... 10.20

The statute directs the Secretary of HEW to approve any state plan which
fulfills the conditions specified in the twenty-four subdivisions of 602(a) and
an additional provision relating to residency requirements. 42 U.S.C. 602(b).
It also authorizes the Secretary, after reasonable notice and opportunity for a
hearing, to suspend federal payments in aid of a plan upon a finding 'that in the
administration of the plan there is a failure to comply substantially with any
provision required by section 602(a) of this title to be included in the plan.' 42
U.S.C. 604(a)(2). Using this, and other parallel provisions, the Secretary
convoked a 'conformity hearing' in late 1970 to determine if Connecticut was in
compliance with various requirements of the Social Security Act; the points
here in dispute were not, however, there decided. We upheld the determination
of HEW, that Connecticut was not in conformity, in Connecticut State Dept. of
Public Welfare v. Dept. of HEW, 448 F.2d 209 (2 Cir. 1971)

Federal jurisdiction rested on a constitutional claim which was nonfrivolous at

the time the complaint was filed. However, the court proceeded, without
objection, to deal only with the federal statutory claim, on the basis of pendent
jurisdiction. The constitutional claim turned out to be without merit in light of
the supervening Supreme Court decision in Jefferson v. Hackney, 406 U.S. 535,
92 S.Ct. 1724, 32 L.Ed.2d 285 (1972), and was also mooted by action of the
state in returning the level of benefits to 100% of need

This challenge does not apply to those items, such as the rent allowance for
those living in public housing, which were budgeted under the previous system
at actual cost. Indeed, since the budgets used were drawn from the base period
6/1/70--5/31/71, the updating of such items exceeded the statutory requirement
Further, in addition to updating based on the CPI--Urban Average, some items
were updated on the basis of actual pricing surveys, while for others the CPI
figure was checked for validity against local prices. Perhaps the most important

example of this last form of updating was the increase in the maximum sum
allowed for private shelter, from $125 to $160, for the period from 2/62 (when
the maximum had been established) to 7/69.
4

The State points to an article from the Department of Labor's Monthly Labor
Review for October, 1973, indicating that 'a new set of consumer price indexes
which measure price changes in urban areas grouped by regions' had been
developed. Plaintiffs respond by pointing to Jackson v. Department of Public
Welfare of State of Florida, 317 F.Supp. 1151, 1161 & n.9 (M.D.Fla.1970),
which referred to Florida's use of 'the Consumer Price Index for the
southeastern region of the United States.'

By Public Act 74--244 the Connecticut General Assembly amended 17--2(a)

of Title 17 of the Connecticut General Statutes so as to direct the Welfare
Commissioner to compute, at least annually, 'a redetermination and such
revisions to all components of the standards of need for the several programs
administered by the department so as to reflect changes in living costs using the
current federal regional consumer price index.' This statute, however, does not
moot this branch of the case because it appears that the figures originally used
in determining CFAP remain as the base

Section 402(a)(23) also requires proportional adjustment of 'any maximums

that the State imposes on the amount of aid paid to families.' Although some
courts appear to have taken the term 'maximums' to refer to ceilings placed on
the cost of items included in the standard of need, see Houston Welfare Rights
Org., Inc. v. Vowell, 391 F.Supp. 223, 228--30 (S.D.Tex.1975), the better view
is that this separate statutory requirement was intended to cover dollar
maximums placed on the level of benefits, resulting in payments at less than
the standard of need. That interpretation is the more natural reading of the
statutory language and best explains the rather brief consideration given to this
clause in Rosado. See Utah Welfare Rights Org. v. Lindsay, 315 F.Supp. 294,
299--300 (D.Utah 1970); see also Dandridge v. Williams, 397 U.S. 471, 482-83 & n.15, 90 S.Ct. 1153, 25 L.Ed.2d 491 (1970). Since Connecticut does not
impose flat dollar maximums on the level of payments, this part of the statute is
not relevant to the issues here raised

See also fn. 14 to Chief Justice Warren's opinion in that case, 392 U.S. at 318,
88 S.Ct. 2128, quoting, inter alia, Representative Vinson's explanation that
'need is to be determined under the State law.' 79 Cong.Rec. 5471 (1935)

Our conclusion that an action challenging an updating required by 402(a) (23)

is not to be used for microscopic judicial scrutiny of previous state plans
satisfactory to HEW seems to accord with New Jersey Welfare Rights

Organization v. Cahill, 349 F.Supp. 501 (D.N.J.1972), affirmed, 483 F.2d 723
(3 Cir. 1973), and with Jackson v. Dept. of Public Welfare, 317 F.Supp. 1151
(M.D.Fla.1970). In Roselli v. Affleck, 508 F.2d 1277, 1281--82 (1 Cir. 1974),
the court gave qualified approval to a district court's rejection of a Rhode Island
plan on the ground that the updated figures for shelter were not meeting actual
need as the state professed to be doing. As we read the opinion, the court was
not holding, as a matter of federal law, that state standards must reflect a
judicially-determined 'actual' need; rather, relying on the district court's
findings, the court was merely saying that the state could not, in going to a flatgrant system, change the basis for determining need from that which it had
imposed on itself
9

The welfare commissioner shall determine the regional shelter component in

the aid to dependent children program as follows: He shall designate three
regions within the state based on the current market value for the rental of
private housing available to welfare recipients and shall establish a maximum
payment in each such region which shall not exceed the mean rent in each
region. The level of assistance payment to each recipient in that program shall
be in an amount equal to the existing flat grant award for payment of rent to
such recipient, except that if the actual rent paid by such recipient is greater
than the existing flat grant award, such payment shall be adjusted by an amount
equal to the difference between the existing flat grant award and the actual rent
paid by the recipient up to the established maximum

10

Since relief in this case can only be prospective, Rothstein v. Wyman, 467 F.2d
226 (2 Cir. 1972), cert. denied, 411 U.S. 921, 93 S.Ct. 1552, 36 L.Ed.2d 315
(1973), and since the effect of the statute is to make the level of benefits for
shelter at least equal to actual rent (except where limited by 'the established
maximum'), it could be argued that the statute makes any claim against the
computation of the shelter component of CFAP moot. However, some
recipients, whose actual cost for shelter is less than the flat-grant sum, will still
be receiving aid at the flat-grant rate. More important, a higher flat-grant sum
will make some families eligible for AFDC aid who would otherwise be denied
it, and eligibility under the categorical assistance program brings with it
eligibility for several other programs as well. While increasing the number of
persons eligible for these programs may not have been part of the Congress'
intent in passing 402(a)(23), there is no denying that it is part of the
provision's effect. Compare Rosado, 397 U.S. at 413, 90 S.Ct. 1207, with
Jefferson v. Hackney, 406 U.S. 535, 543--44, 92 S.Ct. 1724, 32 L.Ed.2d 285
(1972). Accordingly, although plaintiffs' claims have lost much of their
emotional force as a result of the 1974 and 1975 legislation, they have not been
rendered moot

11

One further shelter-allowance issue raised by the plaintiffs is that it was

erroneous to include within the computation of CFAP budgets for rents which
did not meet actual rental costs because the allowance for private housing was
limited to $160 per month, plus 10% for furnished housing. The district judge
rejected this contention, 353 F.Supp. at 77, on the basis of a separate housing
survey conducted by the defendant which was alleged to have shown that, out
of 463 cases randomly selected, in only 7, or about 2%, did the budgeted rent
fail to meet actual need, and then only by an average of about $14 per month;
the judge regarded this as de minimis. Plaintiffs, in their post-trial motions,
indicated that they wished to tender new evidence assailing this survey and the
resultant finding
Given our uncertainty as to the underlying factual situation, we hesitate to rule
on the lawfulness of averaging together maximum and below-maximum
payments where the maximum has been adjusted to account for inflation, as
was here the case. See Houston Welfare Rights Org., Inc. v. Vowell, 391
F.Supp. 223, 238--30 (S.D.Tex.1975). Accordingly, we think it better to leave
this issue open on remand, for consideration in light of the further evidence that
may be introduced and the principles established in this opinion.

12

Before the trial court plaintiffs claimed that the potential population from
which the sample had been drawn was in fact some 3,000 units smaller than it
should have been. The district court dismissed the contention, 353 F.Supp. at
81, on the basis that there was no showing that the omission of these units had
in any way skewed the results actually obtained. Neither in their post-trial
motions nor before this court have plaintiffs indicated that there is any
additional evidence to this effect

13

The State's statistical expert testified that, to meet plaintiffs' proposed standard,
it would be necessary to have a sample as large as about 96% of the entire
AFDC population. One of the plaintiffs' witnesses, although not willing to give
a precise figure, agreed that the necessary sample might be very large

14

The record does not establish how many families in the AFDC population
would fall into each of the units from 10 to 15, although there was evidence that
for size 15 there were only one, or perhaps two, recipient families

15

We see no contradiction between our holding on this point and our ruling,
supra, that the State could lawfully amalgamate the budgets of assistance units
equal to housing units with unequal ones. The issue here is not the total merger
of 'statistically distinct populations,' but rather the unfounded assumption that
assistance unit sizes can be merged for certain purposes while state policy
continues to treat unit size as the crucial variable in its assistance plan as a

whole